How Did Netmarble Devour ‘Woongjin Coway (Now Coway)’, Spat Out by Woongjin Group Due to the ‘Winner’s Curse’?
Netmarble’s acquisition of 'Woongjin Coway (now Coway)' was a mega-deal that starkly illustrated both the limitations of Leveraged Buyouts (LBO) and the epitome of textbook M&A Structuring.
In 2019, to reclaim Coway from MBK Partners, Woongjin Group opted for an overly aggressive LBO strategy, financing 1.6 trillion won of the 2 trillion won acquisition cost through loans and convertible bonds. However, overwhelmed by a massive interest burden, they were forced to resell the company a mere three months after the re-acquisition.
In contrast, Netmarble entered the bidding war with clear strategic objectives: securing a stable 'Cash Cow' to offset the inherent volatility of its gaming business, and creating smart home AI platform synergies leveraging Coway’s 7 million subscriber accounts.
The essence of this transaction lies in its meticulous financial modeling and high-stakes brinkmanship in price negotiations.
Initially, Netmarble secured preferred bidder status by offering 99,000 won per share (totaling 1.83 trillion won) in the main bidding. However, they effectively leveraged the CS Doctor labor dispute that surfaced during due diligence, strategically applying it as a 'Material Adverse Change (MAC)' clause to apply pressure.
As a result, they successfully negotiated the final transaction price for Woongjin Thinkbig’s 25.08% stake (18,511,446 shares) down to 94,000 won per share, totaling 1.74 trillion won, thereby extracting an acquisition discount of approximately 100 billion won.
In terms of the financing structure, Netmarble optimized its liquidity leverage by combining 1.14 trillion won in retained earnings with a modest 600 billion won in low-interest acquisition financing (syndicated loan), secured through its robust credit rating.
Furthermore, owing to the 'conglomerate merger' structure across the disparate industries of gaming and home appliances, the transaction smoothly passed the Fair Trade Commission's antitrust review unconditionally in just one and a half months, completely free from monopoly concerns.
The <Kim Institute M&A Research Young-jin> views this transaction as a quintessential best practice in South Korea's M&A history. By overcoming the pitfalls of a highly-leveraged LBO through sound acquisition financing and risk-adjusted negotiations, and by uniting the physical subscription economy with IT technology to complete financial and strategic synergies, it is thoroughly deserving of being recognized as a Masterpiece of the capital markets.
Based on professional data meticulously analyzed over several years by the <Kim Institute M&A Research Young-jin>, we have produced and uploaded a short video on this subject to YouTube.
The related YouTube Shorts video is scheduled to premiere tomorrow (Sunday, September 20) at 12:00 AM on YouTube.
While the 2-minute YouTube Shorts format makes it extremely easy to understand, there are inherent limitations in providing deep, professional insights within such a short timeframe.
Corporations requiring more professional and detailed materials regarding this case can request data from the <Kim Institute M&A Research Young-jin>. We will provide online access to our comprehensive analysis compiled over several years.
Additionally, we invite companies seeking to resolve complex corporate challenges and propel their growth using creative M&A techniques to apply for a consultation with the <Kim Institute M&A Research Young-jin>. We stand ready to offer tailored solutions.
Thank you.
Sincerely, Young-jin Kim, CEO Kim Young-jin M&A Research Institute (SINCE 2000)
